FX TALKING POINTS:
– USD/CAD Extends Bullish Sequence as Canada Consumer Price Index (CPI) Disappoints. Topside Targets Remain on the Radar.
– AUD/USD Fails to Test Monthly-Low (0.7650) Despite Lackluster Australia Employment Report. All Eyes on Updates to 1Q Consumer Price Index (CPI).
USD/CAD EXTENDS BULLISH SEQUENCE AS CANADA CONSUMER PRICE INDEX (CPI) DISAPPOINTS. TOPSIDE TARGETS REMAIN ON THE RADAR.
USD/CAD extends the bullish sequence from earlier this week, with the pair at risk for a larger advance as updates to Canada’s Consumer Price Index (CPI) does little to boost bets for another Bank of Canada (BoC) rate-hike in 2018.
With the headline reading of 2.3% falling short of market expectations for a 2.4% clip, the below-forecast print is likely keep the Canadian dollar under pressure as its encourages the BoC to keep the benchmark interest rate at record-low throughout the first-half of 2018. The fresh remarks from Governor Stephen Poloz and Co. suggest the central bank remains in no rush to implement higher borrowing-costs as ‘some monetary policy accommodation will still be needed to keep inflation on target,’ and the recent series of dismal data prints are likely to keep the BoC on the sidelines at the next meeting on May 30 as‘GDP growth in the first quarter was weaker than the Bank had expected.’
In turn, the topside targets coming back on the radar for USD/CAD, with the pair at risk for a near-term correction amid the failed attempt to test the Fibonacci overlap around 1.2440 (23.6% expansion) to 1.2510 (78.6% retracement).
USD/CAD DAILY CHART
- The close above 1.2620 (50% retracement) brings the topside targets back on the radar, with USD/CAD at risk of extending the recent series of higher highs & lows as the Relative Strength Index (RSI) continues to come off of oversold territory.
- USD/CAD is coming up against the next hurdle around 1.2720 (38.2% retracement) to 1.2770 (38.2% expansion), with a break/close above the stated region raising the risk for a move back towards 1.2830 (38.2% retracement).
AUD/USD FAILS TO TEST MONTHLY-LOW (0.7650) DESPITE LACKLUSTER AUSTRALIA EMPLOYMENT REPORT. ALL EYES ON UPDATES TO 1Q CONSUMER PRICE INDEX (CPI).
AUD/USD struggles to hold its ground as Australia’s employment report showed a 4.9K expansion in March, but fresh updates to the Consumer Price Index (CPI) may temper the recent decline in the exchange rate as the headline reading for inflation is expected to uptick to an annualized 2.0% from 1.9% during the last three-months of 2017.
Signs of stronger price growth may boost the appeal of the Australian dollar as the Reserve Bank of Australia (RBA) warns that ‘the next move in the cash rate would be up, rather than down,’ and the central bank may gradually alter its tune over the coming months as ‘GDP growth was expected to exceed potential growth and CPI inflation was expected to increase gradually to be a little above 2 per cent.’
Keep in mind, the RBA appears to be in no rush to lift the cash rate off the record-low as ‘there was not a strong case for a near-term adjustment in monetary policy,’ and the aussie-dollar exchange rate stands at risk of facing range-bound conditions as it fails to test the monthly-low (0.7650).
AUD/USD DAILY CHART
- AUD/USD may stage a near-term rebound as it marks another failed attempt to break/close below the 0.7650 (38.2% retracement) region, with the pair at risk for a move back towards 0.7720 (23.6% retracement) to 0.7770 (61.8% expansion) as the Relative Strength Index (RSI) continues to deviate with price.
- Keeping a close eye on the RSI as it comes up against trendline support, with a rebound in the oscillator opening the door for a larger advance in AUD/USD as the momentum indicator extends the bullish formation carried over from the previous month.
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— Written by David Song, Currency Analyst
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